“There’s a great misunderstanding of what’s happened,” says economist Allan Meltzer. The main trouble, in his view, is not that Americans are suffering from weak or negative economic growth. It’s that they have suffered a loss of wealth, a very different ailment…
When the economy contracts, the government may use sound monetary and fiscal policy to help revive growth. But when wealth goes up in smoke, the government can’t necessarily bring it back. If it tries, the effect is likely to resemble what happens when you give a recovering alcoholic a drink: deceptively pleasant at first, but ultimately calamitous.
Institute the No-Loss Rule, retroactively, for housing.
